Allowed

Arcil v. Murugappa krishnan

DRAT20 Jan 2025REGULAR APPEAL/61/2015

Case brief

AI extract

What is this about?

The Appellate Tribunal allowed the appeal filed by a financial institution challenging a DRT order that directed restoration of property possession. The Tribunal held the lower court traversed beyond the scope of the application, which only challenged a sale notice, by deciding on separate measures of possession.

What did the court decide?

Impugned order of DRT-II in SA 15/2015 set aside; SA 15/2015 dismissed thereof; SLR allowed.

Arcil versus Murugappa krishnan — Banking and Recovery | DRAT (2025)

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IN THE DEBT RECOVERY APPELLATE TRIBUNAL AT CHENNAI

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Dated the 20^th Day of January, 2025

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PRESENT: HON’BLE MR. JUSTICE G. CHANDRASEKHARAN

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CHAIRPERSON

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RA (SA) 61/2015

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(arising out of SA 15/2015 on the file of DRT-II, Chennai)

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Between

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The Authorised Officer, Asset Reconstructions CO (I) Ltd. (Division of ARMS), having its Office At No.715-C, 7^th Floor, Spencer Plaza, Phase II, No.769, Anna Salai, Chennai 600 002. Rep. by its Power of Attorney and Authorised Officer Mr. Saravanan

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…..Appellant

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And

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Murugappa Krishnan Son of Late L. Krishnan, No.90, New England Avenue Apartments, No.6, Summit N.J. 07901-18000 USA, Rep. by his Power Agent S. Annamalai Son of P.L. Sambandham, No.25/10B, East Ellaiamman Koil Street, Dr. Radhakrishnan Nagar, Thiruvotriyur, Chennai 600 019.

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…..Respondent

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Counsel for Appellant : M/s V. Jayachandran & Associatges Counsel for Respondent : Shri M. Balachandar

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ORDER

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This appeal is filed under Section 18 of SARFAESI Act, challenging the order passed by Ld. Presiding Officer, DRT-II, Chennai in SA No.15/2015. SA 15/2015 was filed by the respondent challenging the Sale Notice dated 17.12.2014 issued by the appellant fixing the sale of the schedule mentioned property on 21.1.2015. After contest, SA 15/2015 was allowed. Aggrieved by the said order allowing SA 15/2015, appellant financial institution filed this appeal.

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Ld. Counsel for appellant submitted that the prayer in SA 15/2015 was to set aside the sale notice dated 17.12.20124 fixing the sale of schedule mentioned property on 21.1.2015. On the basis of the said sale notice, no sale had taken place. It is further submitted that in view of the fact that no sale had taken place, SA 15/2015 should have been dismissed as infructuous. However, Ld. Presiding Officer, DRT-II, Chennai traversed beyond the scope of the SARFAESI Application and its prayer and found that “ Therefore, it is clear that either Suresh or Badrinath was not in the possession of the Schedule mentioned property, but the applicant was in possession in the capacity as the owner of the land. Further the above said three person have filed the Civil Suit for declaration. In such circumstances, the respondent bank cannot proceed on the schedule mentioned property till the verdict on the above said three Civil Suits. Therefore, I find the action of the respondent bank in taking possession and also issued sale notice is not valid in law. The Possession has to be handed over to the applicant herein. Hence, I find the application has merit to be allowed” . This finding of Ld. Presiding Officer is clearly out of context and beyond the scope of SA 15/2015 and its prayer under SARFAESI Act.

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Ld. Counsel further submitted that act of taking measure under Section 13(4) of SARFAESI Act, is an independent cause of action for any person who challenges the measure taken for taking possession. It is submitted that no challenge was made to steps taken for taking possession and no prayed was asked for against taking possession. In such circumstances, the order of the Ld. Presiding Officer is liable to be set aside and prayed this Tribunal to allow the Appeal.

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In reply, Ld. Counsel for respondent submitted that Order 6 Rule 17 of CPC allows amendment of pleadings and prayer and a s per Rule 7 of Order VII, “ every plaint shall state specifically the relief which the plaintiff claims either simply or in the alternative, and it shall not be necessary to ask for general or other relief which may always be given as the Court may think just to the same extent as if it had been asked for ”.

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It is further submitted that respondent is neither a borrower nor a guarantor or a lessee and he is a third party to the Lis, being one of the co-sharers of the property. His father along with some other neighbours entered into a Joint Development with the builder South Gate Builders Private Ltd. The property mentioned in the sale notice i.e., Flat No.S2 in the 2^nd floor of the building complex built by the said builder was allotted to the respondent and the possession of the said property was forcibly taken on the basis of the order from Ld. CMM, Chennai.

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It is further submitted that initially 40 residential flats were proposed to be constructed in 34,000 sq.ft. in total and two of the co-owners, who had also offered their property for joint development withdrew the offer, hence, the constructed area was reduced to 20,000 sq.ft and 24 flats. Flat No.F6 in the first floor and S2 in the second floor were allotted to respondent’s father Late Krishnan. After the allotment of flat No.S2 to the respondent, the

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builder seems to have entered into a sale agreement on 11.2.2006 in respect of the said flat with Mr. S. Badrinath. This property was in possession of respondent’s father and after his demise with the respondent. The said Mr. Badrinath mortgaged the property for a housing loan in favour of ICICI Bank Ltd and the loan was assigned in favour of appellant. Respondent’s father filed a suit in CS No.150/2007 on the file of Hon’ble High Court of Madras to set aside sale in favour of Mr. Badrinath and for other relief. During the pendency of the suit, respondent’s father Krishnan died and respondent was brought on record in CS NO.150/2007. The said Mr. Badrinath also filed a suit in CS No.660/2009 on the file of Hon’ble High Court of Madras for declaration of title to his property and recovery of its possession to him and the said suit was filed much before the demand notice was issued under Section 13(2) of the SARFAESI Act. These facts show that Mr. Badrinath was not at all in possession of the property and the action of the appellant in taking possession of the property is illegal.

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It is further submitted that as per Section 17(3) of the SARFAESI Act, the Tribunal has got power to pass any orders including granting redelivery of possession. In the said circumstances, Tribunal cannot dismiss the SA as infructuous and Ld. Presiding Officer has taken out every aspect including the suits filed by the respondent’s father and Shri S. Badrinath and rightly found that respondent was in possession of the subject property. In such circumstances only, order was passed stating that respondent cannot take action against schedule mentioned property till three suits are disposed off and the action of the appellant in taking possession and issuance of sale notice are not valid in the eye of law. Thus contending, Ld. Counsel for respondent prayed for dismissal of this appeal and confirm the order of the Tribunal below.

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Ld. Counsel for respondent relied on the following judgments in support of his submissions.

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a) Bhagwati Prasad Vs. Chandramul and Chandramaul Vs Bhagwati Prasad in Civil Appeals Nos.964 and 965 of 1964 reported in AIR 1966 SC 735.

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b) Maqsood Ali Vs.Zahid Ali Sabzposh reported in AIR 1954 AII 385.

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c) Kedar Lal Seal and another Vs. Hari Lal Seal reported in 1951 SCC 1189

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d) Standard Chartered Bank Vs. India Glycols Ltd reported in 2014 SCC Online 3859

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e) Gitarani Paul Vs. Dibyendra Kundu alias Dibyendra Kumar Kundu reported in (1991) 1 SCC 1.

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I have considered the rival submissions and perused the record.

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On a perusal of records, especially SARFAESI Application filed in SA 15/2015 shows that respondent’s father entered into a Joint Venture Development Agreement with the builder viz. South Gate Builders Private Ltd for construction of forty residential flats over 34,000 sq.ft. which was later reduced to 24 flats over 20,000 sq.ft. due to withdrawal of two land owners from the Joint Venture Development Agreement. The property mentioned in the Sale Notice i.e., S2 in the second floor is claimed to have been allotted to respondent’s father and the respondent is said to be in possession of the same. There is also a pleading with regard to the agreement between the flat promoter and Shri S. Badrinath and allotment of the same property to him. One Shri Suresh filed a suit in respect of the same property against the builder in CS 828/2007. The said S. Badrinath also filed a Suit in CS 660/2007 for declaration and recovery of possession against respondent’s father. Respondent’s father filed a suit in CS No.150/2007 for declaration and

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injunction. It is claimed that demand notice under Section 13(2) of SARFAESI Act was issued to Shri S. Badrinath and an ex parte order was obtained from Ld. CMM, Chennai in CRl.MP No.3377/2014 for taking possession. On the basis of this order, forcible possession was taken and respondent filed a Writ Petition in WP No.33995/2014 before Hon’ble High Court of Madras and that was disposed giving liberty to the respondent to approach the DRT. In the said circumstances, SA 15/2015 was filed challenging the sale notice dated 17.12.2014 fixing the sale of schedule mentioned property on 21.1.2015.

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Though it is claimed in SA 15/2015 that Shri S. Badrinath was not in possession of the property and respondent was in possession of the property and possession was taken against law and it is illegal, no prayer was sought challenging the possession taken. Taking possession is one of the measures towards recovery of loan due and it is an independent action giving cause of action for the aggrieved party to challenge the order of possession. Order of Ld. CMM, Egmore, Chennai was passed on 5.7.2014 and it appears that respondent did not challenge this order before DRT. Without specific prayer especially against the measure taken, finding recorded by the Ld. Presiding Officer that action of appellant in taking possession and issuance of sale notice are not valid under law is not based on sound principles of law. Similarly direction to hand over possession to the respondent is also not correct. Respondent has not even taken any steps for amending the prayer before Tribunal below. Judgments relied on by Ld. Counsel for respondent arose out of Civil disputes and proceedings initiated under SARFAESI Act are separate proceedings and are taken in pursuance of the provisions made under the Act.

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12. The Judgment in re Bhagwati Prasad Vs. Chandramul and Chandramaul Vs Bhagwati Prasad in Civil Appeals Nos.964 and 965 of 1964 reported in AIR 1966 SC 735 is pressed into service for the proposition that “ where the substantial matters relating to the title of both parties to the suit are touched, though indirectly or even obscurely in the issue, and evidence has been led about them, then the argument that a particular matter was not expressly taken in the pleadings would be purely formal and technical and cannot succeed in every case”.

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The Judgment in re Maqsood Ali Vs.Zahid Ali Sabzposh reported in AIR 1954 AII 385 is relied on for the proposition that “if the allegations in the plant had been admitted by the defendant, the parties having agreed, it would not be open to the Court, without having the pleadings amended, to give the plaintiff a decree for more than one-tenth”

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The Judgment in re, Kedar Lal Seal and another Vs. Hari Lal Seal reported in 1951 SCC 1189 is relied on for the proposition that “ Court should not throw out a claim on a mere technicality of pleading when the substance of the thing is there and no prejudice is caused to the other side and in any event it is always open to a court to give a plaintiff such general or other relief as it deems it fit provided no prejudice is caused to the opposite side”

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Judgment in re Standard Chartered Bank Vs. India Glycols Ltd reported in 2014 SCC Online 3859 is relied on for the proposition that “DRT is empowered to use rules of the CPC as part of the procedure to be followed during proceedings, since the discretion to regulate procedure is conferred on the DRT in Section 22(1).”

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Judgment in re Gitarani Paul Vs. Dibyendra Kundu alias Dibyendra Kumar Kundu reported in (1991) 1 SCC 1 is relied on for the proposition that “if plaintiff had proved her title, question of ascertaining date of dispossession should not have been gone into”

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As already stated, measures taken under SARFAESI Act gives an independent and separate cause of action like issuance of possession notice, sale notice, etc. Unless there are proper pleadings and prayer challenging the measures taken, Tribunal below cannot pass any order especially order regarding possession without there being any prayer against the possession taken. Therefore, the aforesaid rulings relied on by Ld. Counsel for respondent are not applicable to the facts and circumstances of the present

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case. Ld. Presiding Officer traversed beyond the scope of SARFAESI Application and its prayer filed challenging the sale notice dated 17.12.2014 fixing the sale of schedule mentioned property on 21.1.2015 and found that possession taken and sale notice issued are against law and directed the possession to be restored to the respondent by allowing SA 15/2015.

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In view of the reasons stated above, this Tribunal is of the considered view that above findings of Ld. Presiding Officer, DRT-II, Chennai are liable to be set aside. Accordingly, Order of Ld. Presiding Officer, DRT-II, Chennai passed in SA 15/2015 dated 7.8.2015 is set aside. Consequently, SA 15/2015 is dismissed.

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In the result, Appeal RA(SA) 61/2015 is allowed. Parties are directed to bear their own costs.

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Pending IAs, if any stand closed.

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[Dictated to Steno (SN), transcribed by him, corrected, signed and pronounced by me in open court, this 20^th January , 2025)

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Sd/- (JUSTICE G. CHANDRASEKHARAN) CHAIRPERSON

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Arcil v. Murugappa krishnan

Case brief

What is this about?

What did the court decide?

Arcil v. Murugappa krishnan

Case brief

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What did the court decide?

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